Trade in post-U.S. embargoed Cuba to be modest

A federal factfinding agency’s report said while lifting U.S. trade and travel restrictions to Cuba will inevitably expand exports to the Caribbean country, those opportunities in the medium term may be modest at best.    A federal factfinding agency’s report said while lifting U.S. trade and travel restrictions to Cuba will inevitably expand exports to the Caribbean country, those opportunities in the medium term may be modest at best.
   “Even if U.S. restrictions are lifted, Cuban nontariff measures, institutional and infrastructural factors, and other barriers, including those associated with a non-market, state-controlled economy, still exist and may affect the ability of foreign partners to trade with or invest in the country,” the U.S. International Trade Commission (ITC) said in a statement related to its newly released report, Overview of Cuban Imports of Goods and Services and Effects of U.S. Restrictions.
   The commission’s report, which was prepared at the request of Senate Finance Committee, examines Cuban goods and services imports from 2005 to the present. It also includes a discussion on the effects of U.S. trade and travel restrictions to Cuba on U.S. exports and barriers that U.S. businesses will continue to face when they begin to enter the Cuban market.
   According to the ITC, total Cuban imports of goods reached $9.3 billion in 2014, while imports of services amounted to $2.5 billion. “Before initial U.S. restrictions were implemented in 1960, Cuba was a major U.S. trading partner, ranking as the seventh-largest U.S. export market. In 2014, however, it ranked as the 125th-largest U.S. market, with U.S. exports to Cuba totaling just $299 million,” the ITC said.
   Despite the Cold War-era restrictions, some trade to Cuba, mostly agricultural based, was permitted over the years. The ITC noted while Cuban imports from the United States reached a record $712 million in 2008, they fell to $180 million by 2014.
   The commission also said the global recession, credit restrictions, and the Cuban government’s decision to cut back on U.S. food purchases are considered the significant factors in the 2009-2014 drop in U.S. agricultural exports to Cuba.
   “U.S. restrictions on trade with and travel to Cuba have reportedly shut U.S. suppliers out of a market in which they could be competitive on price, quality, and proximity. These restrictions often raise the cost of doing business enough to make U.S. exports uncompetitive in the Cuban market. Most often cited as problematic is the U.S. requirement that Cuba pay for most U.S. goods in cash or via third-country banks,” the ITC explained.
   The commission also said non-tariff barriers may be a limiting factor to Cuban imports once U.S. trade restrictions are lifted. These include Cuban government controls on trade and distribution, limits on foreign investment and property ownership, currency exchange and “politically motivated decision making.” However, the ITC believes that customs duties and procedures, in addition to sanitary and phytosanitary rules for agricultural imports, “do not appear to significantly impact trade.”
   U.S. agricultural goods, according to the ITC report, will likely remain the top Cuban imports for the immediate future once the U.S. restrictions are lifted and manufactured goods from the United States are expected to be sought after by Cuban consumers. “The United States can supply a variety of products and ship most items at a lower cost than competitors,” the ITC said.
  The commission’s report also noted that U.S. exports of selected agricultural and manufactured goods could increase in the medium term by about $1.4 billion from a base year (2010-2013) of $400.8 million to about $1.8 billion.
   “If U.S. restrictions were removed and Cuban import barriers were reduced to the level of the calculated average for developing countries, the quantitative analysis suggests that U.S. exports of selected agricultural and manufactured goods could increase by an additional $442 million, to a total of about $2.2 billion,” the ITC said.